2024 (4) TMI 1099 - AT - Customs

Revocation of Customs Brokers licence - forfeiture of security deposit and penalty - violation of regulation 10 (n) of the Customs Brokers Licensing Regulations 2013? - non-existent entities have also been filing GST returns with the department - HELD THAT - We have considered the submissions on both sides. DGARM did some analysis and came to the conclusion that several GST registrants did not exist and did not operate from their business addresses at all. It is undisputed that their registrations were issued by the very department which initiated the investigation. Thus the irresistible conclusion is that if the DGARM is correct then the department issued several benami (pseudonymous) GSTIN registrations to several entities which did not exist at all. Some of these non-existent entities have also been filing GST returns with the department. These allegedly non-existent entities were also issued IEC by the DGFT. Thus if the DGARM is correct DGFT had issued benami IECs. Even taking the reports at their face value they do not show that the exporters never existed or had not existed at the time exports had taken place. There was no basis to draw such a conclusion let alone extrapolate it to conclude that the appellant had not fulfilled its obligations under Regulation 10(n). Any of the three methods can be employed by the Customs Broker to establish the identity of his client. It is not necessary that it has to only collect information or launch an investigation. So long as it can find some documents which are independent reliable and authentic to establish the identity of his client this obligation is fulfilled. Documents such as GSTIN IEC and PAN card issued etc. certainly qualify as such documents as none of these departments have any interest in the relationship between the client and the Customs Broker and these documents are presumed to be authentic and reliable having been issued by the Government officers. However these are not the only documents the Customs Broker could obtain; documents issued by any other officer of the Government or even private parties (so long as they qualify as independent reliable and authentic) could meet this requirement. While obtaining documents is probably the easiest way of fulfilling this obligation the Customs broker can also as an alternative fulfill this obligation by obtaining data or information. In the factual matrix of this case we are fully satisfied that the appellant has fulfilled this part of the obligation under Regulation 10(n). The fourth and the last obligation under Regulation 10(n) requires the Customs Broker to verify the functioning of the client at the declared address using reliable independent authentic documents data or information. This responsibility again can be fulfilled using documents or data or information so long as it is reliable independent and authentic. Nothing in this clause requires the Customs Broker to physically go to the premises of the client to ensure that they are functioning at the premises. Customs formations are only in a few places while exporters or importers could be from any part of the country and they hire the services of the Customs Brokers. Besides the fact that no such obligation is in Regulation 10(n) it will be extremely difficult if not totally impossible for the Customs Broker to physically visit the premises of each of its clients for verification. In the factual matrix of this case we find that the GSTIN issued by the officers of CBIC itself shows the address of the client and the authenticity of the GSTIN is not in doubt. In fact the entire verification report is based on the GSTIN. Further IECs issued by the DGFT also show the address. There is nothing on record to show that either of these documents were fake or forged. Therefore they are authentic and reliable and we have no reason to believe that the officers who issued them were not independent and neither has the Customs Broker any reason to believe that they were not independent. The responsibility of the Customs Broker under Regulation 10(n) does not include keeping a continuous surveillance on the client to ensure that he continues to operate from that address and has not changed his operations. Therefore once verification of the address is complete as discussed in the above paragraph if the client moves to a new premises and does not inform the authorities or does not get his documents amended such act or omission of the client cannot be held against the Customs Broker. We therefore find that the Customs Broker did not fail in discharging its responsibilities under Regulation 10(n). The impugned order is not correct in concluding that the Customs Broker has violated Regulation 10(n) because the exporters were found to not exist during subsequent verification by the officers. Thus the appeal is allowed and the impugned order dated 16.06.2021 passed by the Commissioner is set aside with consequential relief to the appellant.

Summary

Issues Involved:
1. Violation of Regulation 10(n) of the Customs Brokers Licensing Regulations, 2013.
2. Proportionality of the revocation of Customs Broker's licence, forfeiture of security deposit, and imposition of penalty.

Summary:

Issue 1: Violation of Regulation 10(n) of the Customs Brokers Licensing Regulations, 2013

The appellant, M/s. Triveni Cargo, contested the order revoking their Customs Brokers' licence, forfeiting their security deposit of Rs. 85,000/-, and imposing a penalty of Rs. 50,000/-. The Directorate General of Analytics and Risk Management (DGARM) identified suspicious GST registrants who did not exist at their business addresses and had Importer Exporter Codes (IEC). The Commissioner suspended the appellant's licence, issued a show cause notice (SCN), and appointed an inquiry officer, who submitted a report leading to the impugned order.

The appellant argued that the alleged violation of Regulation 10(n) was unsupported by facts, as they had obtained all requisite documents for verification from the exporters. The verification report for one exporter, M/s. Vinod Kumar HUF, indicated "Non Existing. Not Recommended," but did not state that the exporter did not exist at the time of export. The Customs Broker's obligations under Regulation 10(n) include verifying the correctness of IEC, GSTIN, identity, and functioning of the client at the declared address using reliable, independent, authentic documents, data, or information. The appellant fulfilled these obligations by obtaining documents such as PAN Card, IEC, GST Registration, Aadhar card, and others, which are presumed to be genuine under Section 79 of the Evidence Act, 1872.

Issue 2: Proportionality of the Revocation, Forfeiture, and Penalty

The Tribunal found that the Customs Broker's responsibility does not extend to verifying the correctness of actions by government officers or maintaining continuous surveillance on the client's operations. The appellant had verified the correctness of the IEC and GSTIN, established the identity of the client using reliable documents, and verified the functioning of the client at the declared address through authentic documents. The Tribunal concluded that the Customs Broker did not fail in discharging its responsibilities under Regulation 10(n) and that the impugned order was incorrect in concluding otherwise.

Conclusion:

The appeal was allowed, and the impugned order dated 16.06.2021 was set aside with consequential relief to the appellant. The Tribunal pronounced the order in open court on 26/04/2024.